When the government announced that it would be offloading 30 per cent of its stake in State power generating company KenGen, investors at the Nairobi Securities Exchange (NSE) went berserk. The 2007 initial public offering (IPO) was thrice the scale of the government’s previous sale in 1996, when 235 million shares for the national carrier Kenya Airways were floated at Sh11.25 each. Investors rallied at the biggest IPO ever, with long queues witnessed outside stock brokerage firms and some selling their equity in other counters to buy KenGen shares, leading to market fluctuations across the bourse. The IPO was oversubscribed by 200 per cent and opened the floodgates to retail investors on an unprecedented scale. Eighteen months later when Safaricom shares went up for sale, the IPO was oversubscribed by 532 per cent. Today, however, the situation at the region’s biggest securities exchange is a far cry from the vibrant and thriving bourse of yesteryears. According to Capital Markets Authority (CMA) quarterly statistics, the NSE 20-Share Index stood at 1,942 at the end of June, down 26 per cent from 2,633 last year. At the same time, the NSE is recording high levels of market concentration, with the top 10 companies accounting for 87 per cent market capitalisation, up from 75 per cent in May. READ MORE
This means investors are pouring their wealth into a handful of companies, making it difficult for other firms to attract equity investment. CMA now says it is currently reviewing its codes and policies to revive the fortunes of the bourse and attract more companies to list. “Even before Covid-19, we had seen signs to suggest that there was going to be a global recession,” explained Regulatory Policy and Strategy Director Luke Ombara. “Short-term federal bonds in the US were attracting better returns than long-term ones, and employment numbers were dipping. Covid has just accelerated the recession, which was imminent as early as 2019.” He added that the local regulator is following the move by other market regulators globally that have had to adopt new guidelines to boost investors’ confidence and safeguard shareholder wealth. “Some countries have set up Covid-19 response bonds, and an example we have seen is Togo,” Ombara said. “But the tenure is about three months, which might not be appropriate for long-term capital raising, but it is something we can consider.” CMA said it is also banking on the […]
